2001 state pension grab still rearing its ugly head
The Butler School District’s challenge in preparing a balanced 2012-13 budget would be markedly less daunting without the pension grab concocted by the General Assembly and former Gov. Tom Ridge in 2001.
That action was irresponsible and will negatively impact public school systems in the commonwealth for years to come — including all of Butler County’s.
For those who might have forgotten what occurred 10 years ago, the General Assembly got Ridge to agree to increase pensions for most state lawmakers by 50 percent. And, the Legislature also bumped up pensions by 25 percent for some 300,000 active state workers and public school teachers.
The pension-hike legislation was rushed through the House and Senate with no floor debate. In exchange for his signature, lawmakers agreed to accept many of Ridge’s 2001-02 budget priorities.
All considered, it would not be unreasonable for school systems to clamor for the state to provide additional help to meet their big pension expense. But the state will be in such deep trouble balancing its own 2012-13 budget that school districts must be satisfied with the 50 percent pension cost reimbursement that they’re currently scheduled to receive.
For the Butler School District, pension costs for those covered by the Public School Employees Retirement System (PSERS) will total $5.59 million in 2012-13, according to calculations completed by retirement system actuaries. That total includes a $1.7 million increase over the district’s total retirement contribution for the current fiscal year, which ends June 30.
District employees covered by PSERS include administrators, teachers, full-time support personnel and some part-time support employees.
Of the $5.59 million, the district is scheduled to receive a $2.8 million state reimbursement, unless state government finds a way to wiggle out of its obligation.
That must not happen.
Butler’s $1.7 million pension obligation increase is the result of pension funding increasing to 12.36 percent, from 8.65 percent, of employees’ gross wages. Responsibility for that jump rests on 2001 lawmakers’ greedy desire for richer pensions built upon strong returns on state investments leading up to that year. Unfortunately, the state’s financial situation went sour a short time later, thanks to the 2001 stock market crash. That was compounded by lower tax collections emanating from worsening economic conditions.
Newspapers across the state should continue to remind taxpayers about how their best interests were ignored in 2001.
The lawmakers of 2001 and Ridge hoped that healthy economic conditions and strong investment returns would absorb the bigger pension funding obligation, with little or no negative impact on taxpayers. But when the stock market crashed and the condition of the economy worsened, state leaders were dealt the grim message that something would have to be done.
“Remedial action” occurred in 2003, Gov. Ed Rendell’s first year, when, in the face of substantially higher mandatory pension payments for the state government and school districts, Rendell and lawmakers struck a deal to push back paying most of the pension obligation for 10 years, kicking the can down the road until later.
That time is now, and bigger payments seem destined to continue well beyond this year.
The potential 2-mill property tax increase that the Butler School Board is considering for 2012-13 — a mill generates $402,000 — is, at least in part, a direct result of the 2001 pension action. Meeting the pension challenge would be easier if the state provided more money.
However, school districts shouldn’t count on it, with the Corbett administration already predicting a difficult 2012-13 state budget-balancing exercise.
The pension grab was — and remains — an example of government at its worst. The day must come when Harrisburg accepts much more of the responsibility for this problem that it has wreaked.
